Justia Banking Opinion Summaries

Plaintiff contracted for satellite TV service. Equipment costs are amortized in monthly payments; a customer who discontinues service owes a fee to cover the unpaid portion of equipment cost. Plaintiff authorized a charge to her debit card should that occur. Plaintiff stopped paying the monthly charge. Defendant collected the termination fee via the debit card. Plaintiff argued that the Social Security Act, 42 U.S.C. 407(a), provides that benefits may not be assigned or subject to attachment or garnishment at the behest of creditors, and that, unbeknownst to defendant, all funds in her account came from Social Security benefits. The district court ruled in favor of defendant. The Seventh Circuit affirmed. Plaintiff's arrangement was consensual, unlike "legal process." The statute does not authorize private parties to sue for damages based on assignments of Social Security benefits.

Plaintiff-Appellee HSBC Bank USA, NA, claimed to be the holder of a note and mortgage on Defendants-Appellants Wesley and Pamela Lyon's house, and initiated foreclosure proceedings against them. HSBC filed a first amended petition late 2008, adding additional defendants, but continued to assert its status as the "present holder of said note and mortgage." The Lyons, noting the facial deficiencies of the unindorsed note filed in the original action, asserted HSBC's lack of standing. The trial court denied HSBC's Motion for Summary Judgment. The trial court allowed the bank time to file an amended petition. HSBC filed its second amended petition again asserting its status as the holder of the note by reason of an indorsement and the assignment of the mortgage. A review of the note attached to the second amended petition demonstrated a blank indorsement from the original lender "without recourse to the bearer" and signed by a vice president of the assigning bank. HSBC then filed a renewed Motion for Summary Judgment in early 2011, which was granted two months later by the trial court. Defendants argued on appeal that the bank still lacked standing to bring suit, and that the summary judgment ruling was in error. Upon review, the Supreme Court found that the trial court properly granted the bank's motion for summary judgment because it had established in its amended petition that it was the current holder of the note, and that the Lyons had not made any payments on the house since 2008.

Heritage Bank sued Jerome Bruha on promissory notes that it had purchased from the FDIC. The FDIC had obtained the notes after it became a receiver for the failed bank that had initially lent the money to Bruha. The notes secured lines of credit for Bruha's benefit. The district court granted summary judgment to Heritage and awarded it $61,384 on one of the notes. The primary issues on appeal were whether the holder-in-due-course rule of Nebraska's Uniform Commercial Code or federal banking law barred Bruha's defenses to the enforcement of the note. The Supreme Court (1) affirmed in part, concluding that federal law barred Bruha's defenses; and (2) reversed in part because of a minor error in the court's calculation of interest. Remanded.

Peoples Federal, a community bank that operates exclusively in Eastern Massachusetts, was chartered in 1888 and became a federally insured savings and loan in 1937. It has used the term "Peoples" in its name and service marks since 1937 and claims to be the only continuous user of the mark for banking services in Eastern Massachusetts since that time. It owns six Massachusetts registrations for its marks. Defendant, People's United, was founded in 1842 in Connecticut, and has used the word "People" in its name for at least 80 years. After acquiring branches in Massachusetts, defendant re-opened them under the name "People's United Bank." Peoples Federal filed suit alleging trademark infringement, trademark dilution, and unfair competition under the Lanham Act, 15 U.S.C. 1125(a), and Massachusetts statutory and common law. The district court denied a preliminary injunction. The First Circuit affirmed, finding that the court properly weighed plaintiff's likelihood of success on the merits, likelihood of irreparable harm, the balance of relevant equities, and the effect of the court's action on the public interest.

Plaintiff sought rescission of her loan secured by a trust deed with the Bank for alleged violations of disclosure requirements under the federal Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. The district court dismissed the suit as untimely because it was filed after the three-year period set by 15 U.S.C. 1635(f). Plaintiff argued that because she gave the Bank timely notice of rescission, she was not required to bring suit within the three-year period, and the district court erred in dismissing the case. The court held that, under the court's precedent and Supreme Court precedent, the time limit established by section 1635(f) was applicable here. Moreover, as explained in Miguel v. Country Funding Corp., section 1635(f) was a three-year statute of repose, requiring dismissal of a claim for rescission brought more than three years after the consummation of the loan secured by the first trust deed, regardless of when the borrower sent notice of rescission. Accordingly, the court affirmed the judgment of the district court.

This action was before the court on a motion for a temporary restraining order (TRO) to enjoin the consummation of a proposed restructuring of a mortgage loan secured by certain resorts properties in Mexico and the Bahamas. Holders of more senior participations claim that the proposed transaction unfairly benefited the junior holder at the expense of the more senior holders in direct contravention of the terms of the agreements controlling the debt. The senior holders further claimed that if the proposed transaction was allowed to close, they would suffer irreparable harm through the loss of certain rights and guaranties under the new terms of the loan. The court concluded that the senior holders have stated colorable claims and made a sufficient showing that they would suffer imminent harm if the proposed transaction were allowed to close. Further, the court found that this potential irreparable harm outweighed the harm that would result to the junior holders by delaying the closing for a few weeks until a preliminary injunction could be heard. Accordingly, the court granted the TRO.

Defendant, a businessman, was convicted on 10 counts of bank fraud (18 U.S.C. 1344) involving creation of 10 fraudulent entries on the books of a small bank in Benton, Tennessee. At trial, the government offered the theory that defendant and the bank's president jointly created the phony entries in an effort to disguise earlier, troubled loans to defendant's business. The Sixth Circuit reversed, finding that the evidence was insufficient to prove guilt beyond a reasonable doubt. The court improperly excluded evidence that the bank president had, unassisted, previously engaged in a large number of identical frauds. The prosecutor suggested to the jury that acquittal would deliver a financial windfall to defendant. The government offered no direct evidence and insufficient circumstantial evidence to show that defendant knew about or participated in the bank president's fraud, a fraud that the bank president had independent reasons for creating.

After Deutsche Bank National Trust Company (Deutsche Bank) brought a foreclosure action against the home owned by Appellants Mark and Jamileh Miller and obtained an Order Authorizing Sale (OAS) from a Colorado court, the Millers filed a Chapter 13 bankruptcy petition. Upon the filing of their petition, an automatic stay entered, halting the foreclosure proceedings. Deutsche Bank obtained an order from the bankruptcy court relieving it from the stay to permit the foreclosure to continue. The Tenth Circuit Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court’s order granting Deutsche Bank relief from the automatic stay. The Millers appealed the BAP’s order affirming relief from stay. The issue before the Tenth Circuit was whether Deutsche Bank established that it was a "party in interest" entitled to seek and obtain relief from the stay. Because the Court concluded that Deutsche Bank did not meet its burden of proof on this issue, the Court reversed the BAP’s order and remanded for further proceedings.

This case arose from a landlord-tenant dispute in the wake of the WaMu failure in September 2008. GE alleged that Chase failed to pay rent on two properties under lease agreements that Chase assumed after it purchased WaMu's assets and liabilities from the FDIC pursuant to terms of a written Purchase & Assumption Agreement (P&A Agreement). GE filed suit against Chase alleging breach of the lease agreements and the district court granted Chase's motion to dismiss GE's complaint on the grounds that GE lacked standing to enforce or interpret the terms of the P&A Agreement. The court held that because GE was not an intended third-party beneficiary of the P&A Agreement, GE had no enforceable rights under that contract. Accordingly, the judgment was affirmed.

IFS and 17 affiliated organizations (collectively, Interamericas) were debtors in a series of Chapter 7 cases. This appeal arose from eight collective adversary proceedings, which a trustee of IFS brought against appellants for avoidance of fraudulent transfers under Chapter 5 of the Bankruptcy Code and Chapter 24 of the Texas Business and Commerce Code. Appellants appealed the district court's affirmance of the bankruptcy court judgment of over $3 million in favor of the trustee. The court held that control could be sufficient to show ownership of what was ultimately a fact-based inquiry that would vary according to the peculiar circumstances of each case. The court also held that the lower courts' findings of ownership were not clearly erroneous and, moreover, comported with precedent and the court's holding today where IFS exercised control over the accounts at issue such that it had de facto ownership over the accounts, as well as the funds contained. The court further held that the record supported the lower courts' findings of fraudulent transfer. Specifically, IFS faced pending lawsuits and mounting debts just as it liquidated nearly all Interamericas' assets and evidence that IFS operated as a fraudulent enterprise at the time of transfer supported this finding of fraudulent intent. Accordingly, the judgment was affirmed.